There are many credit repair services that promise a quick fix for low scores, but they all cost money. You can repair your own score, once you learn how the rating systems work, by making a few simple changes to your current debt situation.
Credit Scores vs. Reports
Credit scores and credit reports are related, but are not the same thing at all. Both can be used to determine whether you will get a mortgage or even whether you will be allowed to lease an apartment, but only one is free.
Reports - A credit report simply lists your debt history information, ranging back to the first time you applied for any type of financing. It will also contain information about previous addresses and other names you have used when applying for loans. Every US citizen is entitled by law (The Fair Credit Reporting Act) to a free report every year from each of the three main reporting agencies: Experian, Equifax and TransUnion.
Scores - A credit score is calculated based on a number of different factors. Some of the issues that affect your score include:
- Length of credit history - The longer your credit history is, the better it is for your overall score.
- Available credit - The amount of money you owe doesn’t affect your rating, except as compared to the amount of credit that you have available. If you have three credit cards, for example, with a combined spending limit of five thousand dollars, your score will be affected by the amount of money that you have charged on those cards. Keep your ratio low by paying down your debt, and your scores will go up.
- Negative items on your report - Avoid late payments, delinquencies and bankruptcy if you want to improve your score.
Repair Your Own Credit With Responsible Borrowing Habits
So, how can you use this information to repair your credit? Try these three simple techniques and watch your score improve over time:
- Get a copy of your free annual report and go through it with a fine-toothed comb. Dispute any errors to remove negative information from your debt history.
- Resolve to make future payments on-time, all the time. Start today, to show a solid history of on-time payments to potential creditors.
- Pay down your debt. This reduces the ratio of available credit to actual debt, which will improve your score.
With responsible borrowing, and an understanding of how credit scores and reports work, you can improve your score, qualify for better interest rates, and secure approval for new financing.
Victoria Nicks - Victoria Nicks has a Master's Degree in IT, and extensive hands-on experience with various types of hardware and software.
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